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Q.What should a person do if they don’t have the money to pay their taxes?
A.This year, many people may well find themselves in the position of having prepared their tax return, but unable to pay all, or part, of the tax due. Regardless of whether you have the funds to pay your taxes, you do want to file your return.
The penalty for failing to file a tax return on time is five percent (5%) of the tax owed per month for a maximum of 5 months. In other words, you will owe a penalty of 5% on the tax due for each month your tax return is late, up to a maximum of 5 months, or 25%.
The penalty for failing to pay the taxes due, on the other hand, is only point 5 percent (0.5%) of the money owed per month, until the tax is paid. In other words, you will owe a penalty of 0.5% each month on the unpaid balance until it is paid in full.
If you cannot borrow the money from a friend, bank, or credit card, consider filing IRS Form 9465 to request an installment agreement.
Because the penalty for failing to file a return is so high (up to 25%), even if you cannot pay your tax bill, at the very least promptly file a tax return.
IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this web site is not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed on a taxpayer under the U.S. Internal Revenue Service.
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